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More health care association execs earn at least $1 million

The ranks of health care association chief executives who earned $1 million or more grew in 2012, Modern Healthcare’s look at the latest publicly available data shows.

Seventeen CEOs earned from $1 million to $5 million, as boards awarded large payouts to retain and reward executives or send them into retirement.

But some prominent leaders saw their pay drop from 2011 to 2012, including Scott Serota of the Chicago-based Blue Cross and Blue Shield Association, Richard Umbdenstock of the American Hospital Association, James Greenwood of the Biotechnology Industry Organization, Karen Ignagni of America’s Health Insurance Plans and Chip Kahn of the Federation of American Hospitals.

Compensation among the highest-paid CEOs on Modern Healthcare’s annual list of health care association executives soared or sank with the bonuses and incentives tied to lobbying success, membership growth or demand for professional education. Bonuses account for a sizable share of CEOs’ total compensation among the highest earners — from 17 percent to 80 percent. Modern Healthcare’s survey was based on IRS Form 990s, which not-for-profit organizations are required to file.

“You want to incent someone to perform,” said Bob Skelton, the chief administrative officer of the American Society of Association Executives, a professional association for association executives. “You would want to see that in a well-run organization that there is an incentive to do well.”

Serota, president and CEO of the Blue Cross and Blue Shield Association, topped Modern Healthcare’s pay ranking for the second year in a row, earning more than $5.2 million, though his pay dipped 5 percent from 2011. His bonus dropped by one-fifth to $1.9 million in 2012. The Blue Cross and Blue Shield Association did not respond to an interview request.

Joseph Parker, the now-retired chief executive of the Georgia Hospital Association, ranked No. 2, receiving nearly $4 million in 2012 — 311 percent higher than in 2011. Just 7 percent of that total was base compensation from the Georgia trade group.

Third in the total pay ranking was Kenneth Raske, president and CEO of the Greater New York Hospital Association, who took home $3.5 million, 14 percent more than the year before. No. 4 was John Castellani, CEO of the Pharmaceutical Research and Manufacturers Association, whose total compensation in 2012 rose 30 percent to $3 million.

Rounding out the top five was Umbdenstock, president and CEO of the American Hospital Association, who earned $2.9 million, down 13.5 percent from the prior year.

The Association of American Medical Colleges awarded Darrell Kirch, M.D., a bonus of $143,000 in 2012 after no bonus the prior year. His total compensation soared 30 percent to $1.2 million, putting him No. 13 on this year’s list. PhRMA’s Castellani and Stephen Ubl, top executive of the Advanced Medical Technology Association, saw bonuses jump 122 percent and 138 percent, respectively. Ubl’s overall compensation climbed 37 percent to $1.9 million to land him at No. 6.

The AAMC, PhRMA and AdvaMed did not comment for this article.

Meanwhile, Ignagni of America’s Health Insurance Plans earned no bonus or incentive pay in 2012 after taking home $931,700 the prior year. Her total compensation dropped 27 percent to $1.3 million, placing her at No. 12 on Modern Healthcare’s list. AHIP declined to comment.

For some, retirement payouts significantly inflated compensation, as was the case for outgoing executives of the Georgia Hospital Association and American Academy of Dermatology.

The Georgia Hospital Association’s Parker retired on June 30, 2013, after 26 years at the state association. Because of deferred earnings, his pay featured the most striking increase in bonus and retirement payouts on the list, with his “other” compensation listed on the association’s Form 990 soaring 316 percent over 2011.

“These earnings, which accumulated over many years, heavily skewed the 2012 Form 990,” said GHA spokesman Kevin Bloye. In addition, Parker earned pay from the association’s for-profit and not-for-profit subsidiaries, doubling his association compensation.

The next closest one-year spike in total compensation was the 95 percent jump awarded to Ronald Henrichs, who retired as chief executive of the American Academy of Dermatology in June 2012. That included multiple years of retirement benefits paid out in 2012, said academy spokeswoman Jennifer Allyn. His total compensation in 2012 was $1.28 million, of which nearly 60 percent was bonus and awards. He ranked 11th on the list.

Overall, the number of CEOs paid at least $1 million increased to 17 in 2012 from 14 the prior year. The median total compensation among the CEOs on Modern Healthcare’s list was $656,943.

Not surprisingly, the size of an association based on revenue is the factor with the most influence on CEO compensation, said Mark Graham, managing director of CEO Update, an association executive publication. The nature of the association’s membership also matters. Associations within an industry where top executives are highly paid are more likely to pay their CEOs a lot. Also, trade groups that focus on lobbying are more likely to pay high sums, Graham said. For example, Kahn of the Federation of American Hospitals received $1.75 million in 2012 — seventh on the Modern Healthcare list — even though his organization had a relatively modest $11.6 million in revenue.

Comp increased more rapidly among execs earning $1M or more

Compensation among the highest-paid CEOs soared or sank with the bonuses and incentives tied to lobbying success, membership growth or demand for professional education.

Compensation increased more rapidly among chief executives earning $1 million or more than among CEOs overall on the Modern Healthcare list. The median increase in total compensation for the $1 million-plus earners was 14 percent. In contrast, there was no increase in median compensation for the entire list from 2011 to 2012.

A number of state hospital association chief executives ranked high on the list, with five earning $1 million or more in 2012, including Parker, Raske, Carolyn Scanlan of the Hospital and Healthsystem Association of Pennsylvania, the California Hospital Association’s C. Duane Dauner and the Tennessee Hospital Association’s Craig Becker. A little farther down the list, Herb Kuhn of the MissouriHospital Association, Douglas Leonard of the Indiana Hospital Association and James Castle of the Ohio HospitalAssociation earned between $750,000 and $1 million.

Raske of the Greater New York Hospital Association received a 41 percent bump in bonus pay in 2012, to $1.9 million. Of that bonus, $778,483 was a partial award for a long-term incentive plan.

GNYHA spokesman Brian Conway explained Raske’s pay by saying the group is “an extraordinarily unique hospital association, with a for-profit business arm that serves tens of thousands of customers nationwide and is involved in billions of dollars in commerce.” Raske’s compensation “reflects both the breadth and scope of GNYHA’s activities and his decades of leadership and accomplishments.”

Dauner saw his base pay increase 22 percent to $931,854 and his incentive pay drop 25 percent to $413,560. Jennifer Newman, chief financial officer of the California Hospital Association, said that was attributable to a change in reporting.

Among those CEOs whose pay dropped in 2012, FAH’s Kahn saw his compensation decline 9 percent to $1.75 million in 2012. That’s in part because a retention incentive boosted his 2011 compensation. His 2012 pay also reflected his annual bonus of $334,248, which is a discretionary award based on the board’s view of Kahn’s performance, said Jeffrey Micklos, the federation’s executive vice president of management and compliance and general counsel.

The AHA’s Umbdenstock also saw his total pay drop in 2012. His base pay, however, increased 2 percent in line with the increase awarded all AHA employees, said John Evans, the AHA’s senior vice president and CFO. Umbdenstock’s bonus, which is tied to performance, climbed 2 percent to $92,411. Umbdenstock saw his deferred compensation and payouts listed as “other” on the IRS Form 990 decline 61 percent and 9 percent, respectively.

Jim Hinton, president and CEO of Presbyterian HealthcareServices in Albuquerque and the AHA chairman, said the AHA’s incentive payouts are tied to performance measurements and targets that go beyond the organization’s financial health, including its success in achieving legislative and regulatory goals and the satisfaction of its members with AHA’s meetings and education.

Modern Healthcare is a sister publication to Crain’s Detroit Business.